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China's New Securities Law Being Put To Legal Test

By Dan Harris
August 23, 2006

Big four accounting firm Deloitte is being sued in a Shanghai court and being called before an administrative board in Beijing for having issued an unqualified audit opinion on a client with 'worrisome finances.'

The accusations are based on Deloitte's alleged failure to issue objective reports about publicly traded Kelon, which is one of China's 100 largest companies. The lawsuit against Deloitte is China's first investor-led lawsuit against an accounting firm, and it is also the first case involving public investors suing financial service providers under China's New Securities Law, which went into effect on Jan. 1, 2006.

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